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MNRE and industry discuss scaling up of rooftop solar market to 40 GW by 2022

On Thursday last week (19th March 2015), the Ministry for New and Renewable Energy (MNRE) called for a meeting to discuss how to best scale up rooftop installations in India to 40 GW (cumulative) by 2022 (refer). It was chaired by Upendra Tripathi, Secretary MNRE, and Tarun Kapoor, Joint Secretary MNRE, and was attended by approx. 300 representatives from the industry. The discussion began on the somber note that despite some existing government policies and the improving economic fundamentals for rooftop solar, the market has not yet gained momentum.

Most stakeholders proposed for standardization guidelines for components, installations and grid-interconnectivity to be followed by all installers

Availability of finance and cost of finance was the third topic discussed

Most installers pointed out (and ministry officials conceded) that the lack of funds and sanction delays associated with the subsidy process has been the primary bottleneck for the market segment. The ministry officials informed that, for 358 MW of subsidy applications received till date only 42 MW actually received it. BRIDGE TO INDIA had previously raised the issue in our analysis with the conclusion that the subsidy mechanism does more harm than good for the market (refer link 1, link 2 and link 3). To close the gap between demand for subsidy and available funds, the government had recently proposed to reduce the subsidy amount to 15% of the capital cost so that more solar can be supported with available funds. Most stakeholders in the meeting, however, preferred that the subsidy mechanism be scrapped altogether for urban grid-connected solar installations. The ministry officials did not spell out their conclusion.

Another topic of discussion was ensuring the quality of new installations and the role of channel partners. Most stakeholders were of the opinion that the process for becoming a channel partner was costly and time consuming, especially in the context of unavailability of subsidy funds. While some stakeholders thought that the channel partner route helped ensure quality, most others proposed that instead of the channel partner mechanism, there should just be standardization guidelines for components, installations and grid-interconnectivity that should be followed by all installers. The ministry officials noted the stakeholder suggestions but again did not spell out their conclusions on the subject.

Availability of finance and cost of finance was the third topic discussed. The ministry officials presented the steps taken by the ministry to bring Indian banks on board to provide more finance (refer) and how international multilateral financing institutions can help reduce the cost of finance (refer).

On the whole, no out-of-the-box suggestions came up from either the industry or the ministry. This is what makes realizing the 40 GW target for rooftop solar such a daunting task. BRIDGE TO INDIA believes that direct government incentives can only go so far, especially in light of the limited availability of funds to the sector. The primary objective of the government should be to create a functioning market place, get states and utilities on board and provide a level playing field to the industry. Net-metering/banking of power with fair compensation to utilities, non-discriminatory quality standards, active collaboration with states and education of end-customers on standards and benefits of solar installations are some of the larger non-incentive ideas that the MNRE could focus on. An opening up of the REC market to more buyers and sellers, as Mr. Abraham of Arise Solar has suggested in an email to us could also help. On the fiscal incentive side, based on BRIDGE TO INDIA’s analysis, interest rate subvention seems to hold the most promise from both the perspective of cost to government and ease of implementation (refer).

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[…] by the inputs received during the stakeholder meeting organized by MNRE on 19th March 2015 (refer). The subsidy mechanism is expected to be replaced by an interest rate subvention scheme although […]